With the cost of living crisis and the UK on course for a recession, we understand that many businesses will see where they can cut their spending, with marketing usually being one of the first things to be slashed as it is often viewed as discretionary. However, in this article we highlight the many reasons why cutting marketing spend during an economic crisis is a bad idea in the long run…
GrowthBox partner Faith recently shared their views on cutting marketing budgets during recession. They refer to various studies throughout history which have shown that business that continue their marketing strategy during economic downturn are likely to fare better, arguing that it is a misconception that cutting marketing will help businesses ‘stay afloat’.
Taking Kellogg’s, one of the world’s best-known brands, as an example, Faith point out that it is only as a result of how they reacted during the 1930s recession that Kellogg’s has the market share that it does today. Before the Great Depression, Kellogg’s was competing with Post, another American cereals manufacturer; the two companies were seeking ways to emerge as the market leader.
Whilst Post decided to pause all their marketing activities, Kellogg’s decided to carry on their marketing plans, which had the result of helping them appear as one of the world’s leaders of convenience foods. By contrast, Post, unable to compete with Kellogg’s, eventually lost all their marketing share.
In a similar vein, BlakSheep Creative have also outlined their main reasons why they believe cutting marketing budgets is detrimental during a downturn. In their article, they stress that cutting marketing spend will put a business at a disadvantage when the market eventually picks up again, and list the main consequences of slashing marketing activity:
Instead, BlakSheep advises using data from your social channels to see where you could make your marketing more efficient such as (1) reviewing your target marketing to ensure you are reaching the right people and (2) to make sure you are measuring your results to determine what is working and what is not working so well.
Similarly, in this article, Duncan McRae from Marketing Tech further points out why cutting sales and marketing budgets typically causes more harm than it does good. The article discusses the latest International Business Barometer report from Sapio Research ‘Wave 6: Preparing for a recession?’, which showed that whilst 95% of the world’s businesses are indeed concerned about a potential looming recession, the concerns are not evenly spread.
Crucially, McRae also mentions that the report showed that responses to any economic crisis are likely to be as baseless as they have been in the past. According to Jane Hales, managing partner, Sapio Research, whilst many companies that tactfully continue their mitigation strategy will be “ramping up sales and marketing activities”, the majority are “still likely to bite the hand that feeds them”. Ms Hales continues with “The highest proportion of potential redundancies are set to be made in crucial areas such as sales and communications.”
Faith argue that the overarching message from the studies they looked at is the importance of considering how your business will reposition itself after a crisis, as the majority of consumers will remember how a company reacted during times of difficulty.
They use a survey conducted by global biopharma company GSK as an example, whose findings revealed that 73% of respondents claimed that how a company presented itself during the Covid crisis would affect whether they would be likely to purchase a product of that brand or retailer in the future.
In sum, Faith’s main message is that it often proves to be more expensive to resume marketing activities as you may lose out on opportunities that your competition will already have latched onto. They stress that it is crucial that a brand continues with their marketing plans to ensure they are creating multiple revenue streams whilst maintaining and building trust and reputation amongst their target group. Their closing advice is to think smarter and adapt their marketing strategy accordingly, but that completely cutting your marketing spend is counterproductive in the long run.
Managing cashflow is crucial at all times of course but marketing isn’t a discretionary activity. Don’t lose touch with those who provide the revenue your business needs. Keep talking with your target audience….but make sure every £ invested works as hard as it can for your business.
For more help and advice, head to our advice pages here: GrowthBox
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